Need Serious Help First Time Home Buyer

[soughtseven1035]

Hi,

I am 28 years old and have lived in PA all of my life. I have been in and out of jobs in this unstable economy. Because of that, my credit score went up and down. I haven't used any new loans in the past 7 years, except my school loan which is maybe $100 a month. The rest of the loans I had dropped off my credit score. My score sits at a fair rating right now. I will have around 20 percent of the home down payment when I want to eventually get a home. I have talked with people and they are telling me I need to be employed for 2 years before I can get any sort of loan out. I worked last summer and did not work the entire year of 2011. I recently found a well paying job and get around $2000 a month and hope to continue working this way. I write for several different companies online and they all have constant work. I am getting asked to write for people daily and it is almost too much work now. Anyways, if I hold this job until 2015 summer, can I get approved for a loan then? My credit score will continue to get better over the years and I would say in 5-10 years, I could actually save enough money to purchase the home all in cash. I know you still need to pay closing costs, property taxes, etc if you buy it outright, but I feel like that is the only way I can get a home. Do they give loans for self employed people? The homes I am looking at are in the $100,000 range. Can I get approved for a home if I have 20 percent of that? Just wondering how to go about all of this. I feel I am getting too old to be still living at home, but I do not know anything about real estate and want to move out as soon as I can. Thank you!

[jjmtmj126]

If you are self employed or have commission income, they need to see 2 full years of employment history.   (Actually the rule is 2 years tax returns.)  It doesn't matter if you have 80% down, you can't get a loan unless you have 2 years commission work history.  

Sorry.  Bummer, I know.

[soughtseven1035]

Thanks for the reply. So after I have 2 years of work history filed with my self employed income, they will let me have a loan? My credit score should go up several points in a few years as well. It seems like that is what is holding me back right? I need to work my job for 2 years, file taxes for it, and then show that to the lending company? Is that because they want to see I have a steady stream of income? Thanks.

Justin

[jjmtmj126]

Yep.  You got it.  Commission income and self employment income is not guaranteed, so in order to count it as income you'll have to show 2 years tax returns.  Keep in mind that it will be the bottom dollar, AFTER deductions that they will count.  So be careful in how much business expenses you deduct.  It's kind of a catch 22.  You want to lower your taxable income by using deductions, but you want to get a mortgage so you need your income to be as high as possible.  But I'd assume with an at home writing job you probably don't have too many deductions.  

[soughtseven1035]

A job is not guaranteed either, you could get fired just because they have too many people. You might have worked there a long time feeling secure as well. It really is unpredictable. Yeah I don't have deductions from my job or expenses. I just write for people and they pay me. How would I write that off each year? I am sure my tax preparer can figure all of that out for me. If I have an income of 30,000 for a year, they might take off a few things for taxes, and maybe leave me with 28,000 total income after taxes. Then after 2 years of that, I show it to a lender with my decent credit score and get approved. A realtor just told me that they do not approve self employment at all now. What is a guy to do! Even if I have 100,000 cash to buy a house, I couldn't get approved for a home because of my employment right? Am I never destined to own a home?